US Fed rate cut hopes and looming tariffs to shape markets in holiday-shortened week

Investors will keep a close watch on potential US rate cuts, additional tariffs on Indian goods, and key macroeconomic data this week, even as equity markets remain closed for Ganesh Chaturthi.

New Delhi: Indication of a potential US Federal Reserve rate cut may trigger optimism in the domestic equity market, with investors' attention shifting to the looming deadline for additional US tariffs on Indian goods in a holiday-shortened week ahead, analysts said.

Moreover, trading activity of foreign investors, global trends and macroeconomic data announcements will also dictate trends during the week.

Equity markets would remain closed on Wednesday for Ganesh Chaturthi.

"Positive global cues are likely to provide some support, as US markets rallied sharply and the dollar index weakened after Federal Reserve Chair Jerome Powell hinted at potential rate cuts in his Jackson Hole Symposium speech.

"Another key factor to watch will be the August 27 deadline regarding the US plan to impose an additional 25 per cent tariff on Indian exports. With clarity still lacking, FII participation may remain subdued. Alongside this, macroeconomic data from the US, China, and India will also be closely tracked," Santosh Meena, Head of Research at Swastika Investmart, said.

US markets ended sharply higher on Friday, with the Dow Jones Industrial Average surging 1.89 per cent, the Nasdaq Composite climbing 1.88 per cent and the sample 500 1.52 per cent.

"The Fed chief Jerome Powell’s Jackson Hole speech indicates a rate cut in September," VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited, said.

The US doubled tariffs on Indian goods to a whopping 50 per cent, including 25 per cent additional duties for India's purchase of Russian crude oil.

Siddhartha Khemka - Head of Research, Wealth Management, Motilal Oswal Financial Services Ltd, said, "We expect Indian equities to remain supported by optimism around GST 2.0 reforms and domestic macro strength. Globally, clarity on US tariff actions against India and upcoming GDP data from both India and the US will shape investor sentiment".

Last week, the BSE benchmark jumped 709.19 points or 0.87 per cent, and the Nifty climbed 238.8 points or 0.96 per cent.

"This week, investors will monitor domestic data releases closely, including the IIP and GDP prints, which will serve as critical indicators of economic momentum," Ajit Mishra, SVP, Research, Religare Broking Ltd, said.